By Uditha Jayasinghe and Alasdair Pal
COLOMBO (Reuters) -Sri Lanka plans to replace its current "unrealistic" budget and is in talks with the World Bank to extend its support by $300 million to $700 million, the country's finance minister said on Wednesday.
The island nation, hit hard by COVID-19 and short of revenue after steep tax cuts by President Gotabaya Rajapaksa's government, is critically short of foreign exchange and has sought an emergency bailout from the International Monetary Fund.
Rampant inflation and shortages of imported food, fuel and medicines have led to weeks of protests that have occasionally turned violent.
"The existing budget is unrealistic, given our challenges," finance minister Ali Sabry told a parliament session.
"We will bring in a new budget that will seek to address core issues of low public revenue."
Sabry said he wanted to increase tax revenue as a share of gross domestic product to 14% within the next two years, from 8.7% now.
Sri Lanka will appoint within the next two weeks financial and legal advisers for a proposed restructure of its sovereign debt, Sabry said, adding that the government was keen to work with the IMF on structural reforms.
"This is the only way to put the economy on a sustainable footing," he said.